Building a crowdsale evaluation process

Cofound.it and Deloitte evaluation best practices

The first step in adding structure and security to the crowdsale space is a transparent evaluation process built on best practices. This process must combine an understanding of the rapidly evolving blockchain space with tried and tested evaluation methodology. The Cofound.it evaluation process is built around a systematic approach to select the projects that are ready for a crowdsale, then to find key barriers and discover where Cofound.it can add value and catalyse the launch of the project. By collaborating with Deloitte, selected projects can also be provided with an outside-in view on their plans and highlight areas that require further refinement for the project to reach full potential, helping build an even better foundation for their business.

Handbook for evaluations

The evaluation criteria for projects should be consistent and follow a preset process. This is a key factor since the goal for the evaluations is to be distributed with consistent quality and results. The process itself should also be reviewed and updated based on the outcomes of each project.

The Cofound.it evaluation process includes the following stages and checkpoints:

Pre-evaluation and filtering

The goal of initial evaluation is to find the answers to the key questions. Do they have a clear opportunity and solution? What is the motivation for a crowdsale supporter to join? Is the right team in place? If these crucial criteria are not satisfied, we outline the missing parts to the projects but do not engage further at this point.

Start evaluation

After the projects pass the pre-evaluation stage, Cofound.it looks at the current but solvable challenges to launching a successful crowdsale and start developing a plan to address them. After that, we identify the elements of the current project where the Cofound.it expert network can add value to the project.

We help projects optimise their strategy, business and profit model, and help articulate the reasoning and outcomes. We also analyse the current business model to gain a better understanding of positioning in the value chain — is the project focusing on a part of the value chain with high or low margin? Can the project scale further across the value chain to grab an even larger share of the pie or even disrupt the current value chain dynamics? Is differentiation due to differentiating features or through efficiency gain/ cost improvement?

Another important aspect of this stage of the evaluation is to check at high level if there is demand for the proposed project. What other similar projects have been launched and tested recently? Ideas may seem great on paper but must fit into a clearly defined and viable business model.

Cofound.it keystone workshop

We have often seen cases of startup founders falling out, with dire consequences both for the project and the supporters. That is why a crucial part in project evaluation is meeting the team and observing the internal team dynamics.

We accomplish that via a 1–2 day workshop where business, communication and legal experts work with the team to finalise all aspects of the value proposition, crowdsale strategy and business launch strategy. Cofound.it only commits to projects after the workshop. While this means that a lot of effort can be lost, this is a key safeguard to protect supporters from projects that cannot deliver on their promises.

Launch evaluation

Before the project is publicly announced, we perform another evaluation to see if all barriers have been overcome and whether Cofound.it supports launching the project at this stage.

Post evaluation

After a completed crowdsale each evaluation in the process as well as the crowdsale itself are evaluated to see if the identified barriers and other areas that were highlighted were addressed in a good way.

Cofound.it and Deloitte

Cofound.it has built its experience in the crypto and startup space. We have followed the crowdsale ecosystem from its beginnings and to date have systematically analysed many crowdsales. Due to their open nature we have also been able to evaluate project progress after the crowdsale to improve our process. The core Cofound.it team has a wealth of experience in the startup space, which helps with understanding the challenges of launching and building a business in a quickly evolving market.

When working together with Deloitte, the key areas Cofound.it focus on are things like team foundation and dynamics, blockchain technology and motivation, token mechanics and design and regulatory questions. In these cases, Deloitte brings us a very structured and proven approach to evaluate the core business proposals of the selected projects.

Deloitte has a set of frameworks, approaches and extensive experience in helping clients understand their business and the environment, where to play and how to win. A structured approach to the evaluation can provide selected projects with an outside-in view of their plans and highlight areas that require further refinement for the project to reach full potential. In order to understand the full potential, Deloitte will focus on internal drivers such as strategy, type of innovation, business model, profit model and sources of sustainable competitive advantage. This will be combined with an evaluation of external drivers such as market characteristics, market attractiveness, consumer trends and competitive positioning. Together, these internal and external drivers, paired with an understanding of the team and technology, can distill the projects with higher chances of success than the rest.

Strategy and business evaluation

A sound strategy foundation is a key element of a successful business — including blockchain projects. This needs to be further supported by the business model to drive revenues and profits. Deloitte will provide an overview of the planned projects with special focus on the business model, business plan and its main assumptions, growth strategy and anticipated performance.

Market characteristics

The goal of the market evaluation is to determine the current state of the market, the position of the project in the today’s marketplace in the wider sense of industry and the envisioned role in the future. Market evaluation includes assessing the value chain, availability of inputs (e.g. already existing code, open source foundations), technologies used in product development, go-to-market approaches and key potential customers and customer types. Special attention will be given to understanding the project’s position in the value chain and their ability to scale-up to grab a larger share of the value chain and disrupt existing premises and patterns. The second part of market evaluation is the direction the market is moving in. As part of that, industry, consumer, technological and regulatory trends are identified and evaluated against company strategy. An evaluation of service offerings by direct competitors and potential service alternatives is also conducted.

Market attractiveness

The evaluation of market attractiveness will be based on Porter’s framework of market forces. It includes assessing the market size, growth dynamics, main risks and potential market shifts. The market attractiveness section will also provide an overview of the macro situation and a connection between the projected performance of the project and the wider fundamentals upon which it is built.

Competitive positioning

An evaluation of competitive positioning includes an analysis of the “wider” industry to capture ripple effects that the project may bring to other industries. The main areas of focus include key success factors, competitive position of the project, identification of key differentiators of the project and core anticipated competitors, the sustainability of said differentiators (a.k.a. “The moat”), and measures to expand and protect the market position.

Conclusion

Proper due diligence is important for anyone involved with any new ventures. The blockchain space in general and the crowdsale space specifically create entirely new demands, and new best practices are constantly being developed. We believe we have a good approach with a continuously evolving and improving process that combines a wealth of best practice and knowledge from the traditional space with experience and new learning from the crypto space. With this method we are confident that we will be able to select great projects, identify red flags and other barriers and find areas where we can help the project launch move out of the crowdsale phase in the best possible shape, for the maximum possibility of long term success.

Authors:
Daniel Zakrisson, Cofound.it
Lan Filipic, Deloitte